What do You Understand by the Term Institutional Trades?

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Trades by Mutual Funds and Foreign Institutional Investors are termed as Institutional trades. Transactions by MFs in the secondary market are governed by SEBI (Mutual Funds) Regulations, 1996. A MF under all its schemes is not allowed to own more than 10% of any company’s paid-up capital.

They are allowed to do only ‘delivery-based’ transactions. With effect from 21st April, 2008 a MF may engage in short selling of securities in accordance with the framework relating to short selling and securities lending and borrowing specified by SEBI.

A MF cannot invest more than 10% of the NAV of a particular scheme in the equity shares or equity related instruments of a single company.

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The investment by FIIs is governed by the rules and regulations of the RBI and the SEBI. As per the RBI guidelines, total holding of each FII/sub-accounts should not exceed 10 % of the total paid up capital or paid up value of each series of convertible debentures.

Further total holding of all the FIIs/sub-accounts put together should not exceed 24 % of the paid up capital or paid up value of each series of convertible debentures.

This limit of 24 % can be increased to the sectoral cap / statutory limit as applicable to the Indian Company concerned, by passing a resolution of its Board of Directors followed by a special resolution to that effect by its General Body.